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Dollar jumps to four-year high against yen

The Australian dollar powered to fresh four-year peaks against the yen on Monday, underpinned by a return to carry trades, while both currencies held firm versus their US counterpart.

The dollar soared as far as 92.83 yen, its highest since September 2008, showing a gain of 2.4 per cent since last week. It has risen nearly 10 per cent in the past two months on expectations of much more aggressive monetary easing in Japan.

Broad selling of yen out of Tokyo early in Asian trading helped push the dollar higher. The Antipodean currencies have lately benefited greatly from a yield play as investors borrow cheaply in yen to buy high-beta assets.So much so, that a pull back could be in the cards.

"The yen looks oversold, and it's starting to feel heavy at these levels given the fundamentals," said Michael Turner, a strategist at RBC Capital Markets.

He said a correction to around 90 yen could easily occur should there be a risk aversion move.

Minor resistance for the dollar was seen at 93.20 yen before 96.50, and a break above could target the psychological level of 100. It last fetched 92.24.

Against the US currency, the Australian dollar paused at $US1.0487, from $US1.0479 in New York on Friday. It briefly hit $US1.0513 due to heavy buying in the AUD-yen cross.

The local currency received support from further gains in key commodity prices, with spot iron ore prices now up 77 per cent from their September lows at $US153.3 a tonne.

The jump is a big boon to profits and incomes as the steel making mineral is Australia's single largest export earner.

The dollar last changed hands at $US1.0480, not far from a three-month peak of $US1.0585 hit in December. Immediate resistance was found at $US1.0527, last week's peak with traders citing stops above $US1.0530.

The dollar recovered from a fall Friday after minutes from the Federal Reserve's policy meeting showed some board members wanted to slow asset purchases earlier than previously thought.

The dollar kept large gains on the euro, which suffered a reversal last week. The euro skidded to three-week lows of $1.2436, well off a three-month peak of $1.2807 touched in December.

Australian government bonds were dead quiet, hovering near multi-month lows with the three-year contract unchanged at 97.160 and the 10-year contract steady at 96.580.